What U.S. Banks Must Know About UK’s Bold Plan to Tackle Fraud

Fraud is surging at record levels all over the world. The UK's unique Fraud Strategy 2023 is a multi-pronged approach combining cutting-edge technology, enhanced law enforcement and industry collaboration to tackle the problem head-on. From banning cold calls to creating a specialized fraud squad, the strategy aims to cut fraud by 10%. For U.S. bankers, it's a clarion call to action, highlighting the need for cross-sector cooperation and innovative solutions in an increasingly cashless society. As digital payments evolve, so too must our defenses against those who would exploit them.

The report: Stopping Scams Against Consumers: Roadmap for a National Strategy

Source: Nick Bourke, funded under contract with the Consumer Bankers Association (CBA)

Why we picked it: As fraud increasingly transcends national boundaries, the challenges faced by the UK banking sector mirror those encountered in the U.S. The comprehensive approach outlined in this strategy underscores the need for a coordinated, multi-stakeholder response to combat fraud effectively — a lesson that U.S. bankers would do well to heed.

Executive Summary

A sinister undercurrent threatens the financial security of millions in the United States. Scammers, armed with sophisticated techniques and exploiting the anonymity of the online world, can now empty bank accounts in minutes and erase life savings with a simple click.

Where the United States has struggled to keep up, the UK government has unveiled an ambitious and comprehensive strategy to fight back. Home Secretary Suella Braverman, when she was appointed in late 2022, declared an all-out war on fraud — which accounts for a 40% of all offenses in England and Wales.

Her goal? To cut fraud by 10% and protect citizens’ hard-earned cash from the clutches of these digital predators. This bold initiative, outlined more clearly in the Fraud Strategy 2023, brings together a coalition of government agencies, law enforcement bodies, regulators, industry players, financial institutions and charities in a coordinated effort to combat this pervasive crime.

Key Takeaways:

  • The UK plans to ban cold calls on all financial products and SIM farms used for mass scam texts.
  • A new national fraud squad with over 400 specialist investigators will be established.
  • The government aims to make it easier for fraud victims to be reimbursed and supported.
  • Tech companies will face tougher penalties if they don’t protect customers from fraud.

Looking to skip the context and learn what your financial team can do to take action? Skip to it.

The Scale of the Problem

Before delving into the strategy’s specifics, it’s crucial to understand the magnitude of the fraud problem facing the UK. In 2021 alone, victims reported losing £2.35 billion to fraudulent activities. But, it extends beyond individual victims, posing a significant threat to national and economic security.

Of course, the first line of defense focuses on prevention. By cutting off fraudsters’ primary communication channels, the government aims to significantly reduce their ability to reach potential victims.

For instance, one of the most significant measures highlighted in this paper is the ban on cold calls for all financial products. This move targets one of the most common methods scammers use to hook their victims — especially elderly and vulnerable populations. By eliminating this avenue, the government hopes to prevent countless individuals from falling prey to high-pressure sales tactics and fraudulent investment schemes.

In addition to banning cold calls, the strategy also prohibits the use of SIM farms. These devices — which allow scammers to send thousands of fraudulent text messages simultaneously — have been a significant tool in the fraudster arsenal. By outlawing their use, the government aims to drastically reduce the volume of scam texts circulating in the UK. The plan includes a comprehensive review of mass text aggregators and explores ways to prevent scammers from sending bulk scam messages. This approach recognizes that, as one avenue closes, fraudsters often seek alternative methods, and aims to stay one step ahead of their evolving tactics.

Another key focus is combating “spoofing,” a technique where fraudsters make their calls appear to come from legitimate UK businesses. By making it harder for scammers to disguise their true identities, the strategy aims to help individuals more easily identify and avoid fraudulent communications.

For U.S. bankers: While several of these tactics are less relevant for legacy banks and credit unions to implement, they are important to keep in mind when working with their customers. These tricks a fraudster may utilize to look like your financial institution.

Supporting Victims and Fostering Accountability

Recognizing that prevention alone is not enough, the strategy places significant emphasis on enhancing the law enforcement response to fraud. But, oftentimes, banks and credit unions are not at the core of the mitigation efforts. Instead, financial institutions can help focus on the prevention and aftermath effects. In addition to financial support, the strategy implemented by UK agencies includes plans to overhaul fraud communications. The aim is to better educate the public on protection methods, reporting procedures and steps to take if one becomes a victim of fraud. By empowering individuals with knowledge, the government hopes to create a more fraud-resistant population.

The strategy also puts significant pressure on the tech sector to step up its anti-fraud measures. Large tech companies will be required to make fraud reporting as simple as possible for users, implementable within a few clicks — measures that can also be adopted by proactive traditional banks and credit unions.

The Fraud Strategy 2023 is not just about addressing current fraud methods but also about anticipating and preparing for future threats. The appointment of Anthony Browne MP as Anti-Fraud Champion signals the government’s commitment to keeping this issue at the forefront of policy discussions.

One innovative approach is the strategy’s focus on revolutionizing tech company action to block fraud at an industrial scale. This includes creating new powers to take down fraudulent websites quickly and efficiently, recognizing the speed at which online fraud can spread and cause harm.

For U.S. bankers: If your institution feels ill-prepared to combat fraudsters through internal tech investments, partnering with a tech companies that understand the importance of protecting customer data is a strong start.

The strategy also emphasizes the importance of slowing down suspicious payments. By working with banks to implement more robust verification processes for high-risk transactions, Braverman’s instituted plan aims to give potential victims and authorities more time to identify and stop fraudulent activities before funds are lost.

Dig deeper:

Where Do U.S. Bankers Go From Here?

As the UK government and financial industry embark on this comprehensive approach to tackle fraud, the world will be watching. The Fraud Strategy 2023 represents an innovative attempt to address one of the most pressing issues of our digital age. It recognizes that combating fraud requires a multifaceted approach, involving government, law enforcement, industry — and the public. By taking a leadership role in the global fight against fraud, the U.S. could set a new standard for international cooperation in this area.

Here are a handful of steps that U.S. financial institutions can take to mitigate the risk of fraud for their customers, based on the strategies used in the UK.

Cross-industry collaboration and information sharing: The strategy emphasizes “de-siloing” information and fostering instantaneous information sharing among financial services firms, including fintech companies. U.S. bankers could take immediate steps to improve their fraud prevention efforts by advocating for and participating in more robust data sharing initiatives within the industry. This could involve working to enhance existing mechanisms like Section 314(b) reporting under the PATRIOT Act, or pushing for the development of new, more efficient systems for real-time fraud data exchange.

Partnerships between the banking sector, telecommunications companies and tech firms: The UK strategy recognizes that fraudsters operate seamlessly across these sectors, and an effective response requires coordinated action from all. U.S. bankers could begin by reaching out to counterparts in the telecom and tech industries to establish working groups focused on developing joint anti-fraud measures. This could include exploring ways to better protect customer service and marketing functions from scam risks, or collaborating on the development of standardized fraud warning systems for customers.

The strategy’s emphasis on improving payee confirmation and risk assessment in real-time payment systems is another area where U.S. bankers could take immediate action. By evaluating their current practices and exploring new technologies to enhance transaction monitoring and customer authentication, banks can strengthen their defenses against fraud in fast-paced digital payment environments.

Engagement with U.S. law enforcement. U.S. bankers are potentially one of the most well-equipped parties in the war against financial fraud, and can share insights, improve reporting mechanisms and advocate for increased resources dedicated to combating financial fraud.

Editor’s note: This article was prepared with AI language software and edited for clarity and accuracy by The Financial Brand editorial team.

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